An instruction manual on how to save money

Everybody is going crazy about the biggest jackpot in US lottery history, but I don’t want any part of it. The lottery sucks. It is a unfair rip off that we need to get rid of. Here are all the reasons I hate the lottery.

Even the huge record jackpot is no deal

On the day this article is published, the powerball lottery is scheduled to payout a record jackpot of $1.5 Billion. It is all over the news and everybody is talking about buying tickets, but even that huge jackpot is a lousy deal. Let’s do the math.

First of all, that claim of a $1.5 billion dollar jackpot is bullshit. It is really only $930 million. They claim it is $1.5 billion using a mathematical technique known as lieing. The prize is really worth $930 but one form of that $930 would be to get the prize over the next 30 years which would effectively earn interest and lead to total payments of $1.5 billion. That doesn’t change the fact that today the immediate value of that payout is only $930 million.

Of course, you won’t actually get the $930 million, you will have to pay the maximum US tax rate on that money at 39.6% which means the payment you actually receive is only about $562 million. Most American’s live in a state with state income taxes, so they would actually earn much less, but we will stick with the $562 million for now.

Now lets get to the odds. Your odds of winning are about 1 in 300,000,000. Each powerball ticket costs $2. If 300,000,000 powerball tickets are sold and one of them wins, that means that the winner will receive $562 million and the lottery would have taken in $600 million. That is a payback rate of 93.6%, which by gambling standards sucks.

Blackjack and craps have an average payback rate of 98.5%. You wouldn’t think of blackjack or craps as a good investment (unless you are an idiot), but the best payout in the entire history of the lottery in the United States has a payout rate which is over 4 times worse!

Slot machines are one of the worst bets you can make in a casino, and even they pay back an average of 94.3% in Las Vegas.

That of course assumes there will only be 1 winner. If two people get the winning number and split the pot then you can just drop all those numbers in half and the expected payout rate becomes less than 50%.

That’s the lottery at it’s best. Normally it is a lot worse.

I took a look at the financial statements of the California state lottery and it showed just how bad a deal the lottery is. According to these audited financial statements, the California state lottery has a payback rate of just 61.2%.

States with state regulated casinos set minimum payout rates that slot machines must legally pay back which are set anywhere between 80%-90%. If a casino’s slot machine paid out as little as the lottery pays out they would be illegal. So why is the lottery allowed to pay out so little?

But, education!

Those who support the lottery point out that it raises a bunch of money for states’ education systems and other worthwhile causes. You could look at it as nothing more than a tax. The most fun tax ever!

The problem with this idea is who is paying for it. According to a study by Duke University over half of all lottery revenue comes from the poorest 1/3 of our fellow citizens. Now many of these people are poor because they don’t really make very good decisions with their money, which is why they buy lottery tickets to begin with. But, the lottery preys on these folks. Walk around a rich neighborhood for a while then walk around a poor one. Where did you see more lottery advertisements? It wasn’t in the nice part of town.

So if you look at the lottery as a fun tax, then it an unethical one. What kind of tax makes the poor pay but not the rich?

Get rid of the lottery

The lottery sucks and we need to get rid of it! How? I don’t know, I’m not really a very political guy.

I am just a guy that writes articles about how people can save a few bucks here and there. So that is where we will start, just by getting rid of the lottery draining our wallets. Don’t buy tickets. Not for $1.5 million, not for $1.5 billion, not even for $1.5 trillion.